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Devising a Forex Strategy That Will Work Over Time - Part II

By Andrew Daigle

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Published: 18Mar2010
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Last time we talked about the forex trading strategies that will work over time for each individual trader, today we will dig deeper to help you discover and devise the strategy that will open your door to financial success. Once you have decided whether you are a scalper, medium or long term forex trader, you can start building the framework of your forex strategy. Since we want to give you the best possible odds of making a profit, this article will focus on the odds, rather than forex trading strategies that rely on automated trading systems.

The medium term trader has the least amount of capital to start with, and the fewest opportunities to execute trades, which mean his forex strategy will rely on how well he interprets the technical information and the decision reached. This sounds like a lot of work for not a lot of pay off, but the trick is finding those times when the majority of the forex indicators point in the same direction. A patient trader will wait until the signs lead him to profits.

Choosing Forex Trading Software - Now that you understand where you fall in terms of choosing a forex trading strategy that will work for you, it's time to choose trading software. There are many trading programs from which you can choose, but until you feel comfortable with the technical ins and outs for forex, choose forex trading software that allows a free demo account so you can practice the forex strategy that's right for you. Before you choose, there are a few basic must-haves of any forex trading software:

1. Capability to display (at least) three distinct time frames at the same time. 2. Capability to plot common technical indicators.

Set up Forex Indicators - Once you have selected forex trading software, it is time to start setting up the indicators. The forex indicators you choose should help you implement the forex strategy you wish to employ, medium term if you have little capital, and short or long term if you have the capital to risk. Forex indicators show you, in graph form, the price at a particular point in time. In order for you to decide how to act, you will set up several different indicators and wait for them all to point in the same direction. This sounds like an easy strategy, and with patience and skill it can be.

Keep in mind that the more forex indicators you set up in your forex trading software, the more reliable your forex strategy will be. Conversely, the more indicators you have set up, the fewer opportunities to trade will arise. The key when setting up your forex indicators is to decide if you want a reliable forex trading strategy that works but provides fewer opportunities, or one that is less reliable but creates more opportunities to trade. Medium term traders will focus on reliable but infrequent trades to make a profit.

When you devise your forex strategy, make it for the capital you have now, not the capital you plan to have in the future. You can always change your forex trading strategy when you need to.

Andrew Daigle owns many successful websites including ForexBoost, a free Forex educational site to learn Forex trading strategies and partners with FX Instructor for live forex trading sessions and professional educational services.

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